Midtown Office Leasing Will Prevail

ATLANTA-Commercial real estate executives are upbeat about prospects for the city’s Midtown office submarket, citing the advantage of infrastructure improvements in recent years. They point out that it has less new space under construction than neighboring Buckhead, which could cause trouble there in the long term.

Midtown’s future was among several topics touched on during a panel discussion hosted last week by law firm Arnall Golden Gregory LLC. About 350 people attended Thursday’s breakfast meeting at the BB&T Building.

First-quarter statistics by Jones Lang LaSalle show that Midtown’s vacancy rate of 17.8% is between Buckhead’s 16.4% rate and 19.7% for Downtown Atlanta. Midtown rents are also in the midrange at $24.69 per square foot, just a dollar over the citywide average.

With 14 million square feet of office inventory, Midtown is expected to hold its own because of recent improvements to streets and mass transit making access easier, along with the younger demographic being drawn to residential developments near Piedmont Park. At least 1.2 million square feet of new class A office is now under construction, while the affluent Buckhead market has two million, JLL statistics show.

“There will be a lot more blood on the streets in Buckhead,” observed John Robbins, senior vice president of development with Shailendra Group LLC. Buckhead has four buildings fighting for limited tenant demand, while Midtown has just two, he said.

Apart from that, local office brokers are confident in the entire market’s long-term prospects, according to Abe Schear, a partner in Arnall Golden Gregory and chair of its commercial real estate/leasing practice team. “This has always been a successful commercial market,” Schear tells GlobeSt.com. “There is a great belief in Atlanta. The question isn’t if it will come back, but when.”

Other topics covered during the two-hour event included the question of whether billions of dollars worth of CMBS debt coming due this year will be refinanced. Panelists questioned the veracity of numbers in recent media reports citing over $200 billion in CMBS and whole-loan commercial debt being unable to qualify for refinancing through 2012.

“Bank loans and CMBS loans are handled differently, and why shouldn’t commercial banks extend loans? There are some extensions being granted,” said David Cobb, president and CEO of BentleyForbes.

As for the federal government’s proposal to offer toxic assets to the investor market, buyers may be able to start a needed “cleansing process” by foreclosing on those properties, said Matthew Bronfman, president of Jamestown Management Corp. “It appears as if the general public is in tune to the fact that a wave is coming and they can already project it,” he added.

Steve Baile, senior vice president of Atlanta operations with Daniel Corp., and John Whitaker, managing director of Atlantic Station, also were on Arnall Golden Gregory’s panel. The discussion is an annual event of the firm, Schear says.